(Sharecast News) - London stocks closed weaker on Thursday, after the Bank of England sated market expectations by raising interest rates.
The FTSE 100 ended the session down 0.71% at 7,528.84, and the FTSE 250 was 1.27% weaker at 21,967.78.

Sterling was mixed, last trading 0.13% stronger on the dollar at $1.3594, and weakening 1.06% against the euro to €1.1883.

"The Bank of England, for once, has done as expected, raising rates to 0.5%, but the surprise appearance of a flight of hawks has prompted gains in the pound," said IG chief market analyst Chris Beauchamp.

"It is clear that some policymakers are now very worried about inflation getting out of control, but while the bank is only supposed to worry about inflation and not the impact of rate hikes on the consumer, it will have to consider the risks of stalling economic growth with its tighter monetary policy.

"Some of that nervousness is being reflected across the FTSE 350 today, with stocks heading lower in the wake of the news."

Indeed, the Bank of England increased interest rates to 0.5% at lunchtime, as it looked to curb soaring inflation.

The widely-expected 0.25 percentage point hike followed December's decision to increase rates to 0.25% from a record low of 0.1%.

It was the first time since 2004 that the central bank has opted to lift interest rates at two consecutive Monetary Policy Committee meetings.

"It was a hawkish hike from the MPC," said Victoria Scholar, head of investment at Interactive Investment.

"Although all voters called for a hike, the committee was divided over the extent of the increase, suggesting it is seriously concerned about the inflationary backdrop.

"In another hawkish move, the BoE began unwinding its quantitative easing stimulus programme as its monetary policy regime shifts from easing to tightening."

Across the channel, the European Central Bank kept all its main policy levers at their current settings following Thursday's meeting of its governing council.

As was announced at its December meeting, asset purchases under the Pandemic Emergency Purchase Programme would stop at the end of March, even as purchases under its alternate Asset Purchase Programme were bumped up in order to ensure a smooth transition.

Rate-setters also left the door open to restarting purchases under PEPP if needed.

In economic news, an industry survey showed the UK construction sector was expecting to grow throughout the current year, despite ongoing skills and material shortages.

According to the latest RICS Construction and Infrastructure Monitor, a net balance of 33% of respondents said they had continued to see an increase in demand during the last three months of 2021.

New infrastructure projects, specifically in the energy sector, were responsible for much of the increase in workloads.

"There is clearly an upbeat tone to the feedback received from across the construction industry," said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors.

"However, the concerns around labour and in particular skilled labour are just not going away.

"The long-term fix is to attract more younger people to the sector but that may be insufficient to address the immediate problem, which significantly is being reflected in expectations for a sharp uplift in wage costs over the next year."

Prices charged by UK service providers, meanwhile, rose at the fastest pace for more than 25 years in January as business activity strengthened.

About one in three service businesses increased their prices and only 3% reported a decline, according to the IHS Markit/CIPS UK purchasing managers' index.

The increase was the highest on record since the survey began in 1996.

"The latest PMI data provide good news about prospects for the UK economy in 2022 as demand has started to recover from the impact of Omicron restrictions and most businesses expect only a temporary slowdown from cancelled bookings and staff absences," said Tim Moore, economics director at IHS Markit.

"However, record price increases in the service economy are set to add to the cost of living crisis for UK households."

On the cost of living front, the energy price cap was confirmed to be rising by more than 50% from 1 April, causing average household energy bills to surge to around £2,000 a year.

Energy regulator Ofgem said the 54% hike would affect 22 million households, with those on default tariffs paying by direct debit seeing an increase of £693, from £1,277 to £1,971.

Prepayment customers would see an even larger hike, from £1,309 to £2,017.

"We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can," said Jonathan Brearley, chief executive of Ofgem.

"The energy market has faced a huge challenge due to the unprecedented increase in global gas prices, a once in a 30-year event, and Ofgem's role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas."

Westminster made moves to help, however, with the Chancellor setting out a series of measures intended to help households tackle the soaring cost of living.

Speaking shortly after energy regulator Ofgem announced average energy bills would rise by £693 this year, and the Bank of England increased the cost of borrowing, Rishi Sunak told MPs that the government would provide "direct support" for households.

Under the measures announced, all domestic electricity customers will now receive a £200 rebate from their supplier from October, with the taxpayer meeting the cost.

The discount would be automatically recovered from people's bills over a five-year period, starting from 2023.

In equity markets, Compass Group jumped 4.02% after the catering group reported a 39% increase in first-quarter revenue and said revenues had reached 97% of their pre-Covid level.

Playtech leapt 8.298% as a fresh potential bid for the gambling software maker emerged, hours after a £2.7bn offer from Australia's Aristocrat Leisure collapsed.

TT Bond Partners, which advised on an earlier bid for Playtech from Gopher Investments, was given consent by Playtech to release it from restrictions that would stop it from tabling a further offer.

Renishaw was ahead 6.71% after it posted a jump in interim profit and revenue and said it had seen a "record" level of demand as key market sectors recover.

Cranswick gained 1.24% after it backed its full-year expectations following a solid performance over the festive period.

Banks gained after the Bank of England's rate hike with Barclays up 0.69%, Lloyds Banking Group ahead 0.83%, and Standard Chartered rising 0.51%.

Miners were also on the rise as metals prices gained, with Glencore up 0.25% and Rio Tinto 0.35% firmer.

On the downside, BT slid 4.83% after it said it was in talks with Discovery Inc about forming a sports joint venture, and reported a 3% drop in profit for the first nine months of the year.

Shell reversed earlier gains to close down 1.24% after the oil giant posted better-than-expected fourth-quarter profits, driven by surging oil and gas prices and announced an $8.5bn share buyback.

Media group Future lost 9.74% even after it backed its full-year expectations and said trading in the four months to the end of January was in line with expectations.

Outsourcer Bunzl was 3.06% weaker after a downgrade to 'sell' at Goldman Sachs, while Auction Technology Group slid 9.62%, tracking heavy losses in US tech stocks after disappointing results from Facebook owner Meta.

JTC was down 5.96% despite saying that annual results would meet expectations after a year of strong new business growth for the asset manager.

Market Movers

FTSE 100 (UKX) 7,528.84 -0.71%
FTSE 250 (MCX) 21,967.78 -1.27%
techMARK (TASX) 4,390.74 -1.60%

FTSE 100 - Risers

Compass Group (CPG) 1,720.00p 4.02%
Rolls-Royce Holdings (RR.) 116.66p 1.27%
Vodafone Group (VOD) 133.58p 0.95%
Lloyds Banking Group (LLOY) 53.30p 0.83%
Land Securities Group (LAND) 798.80p 0.81%
BP (BP.) 392.40p 0.73%
British American Tobacco (BATS) 3,190.50p 0.71%
Barclays (BARC) 204.45p 0.69%
Aviva (AV.) 439.90p 0.57%
Unilever (ULVR) 3,800.50p 0.56%

FTSE 100 - Fallers

Flutter Entertainment (CDI) (FLTR) 10,600.00p -5.31%
BT Group (BT.A) 186.05p -4.83%
Croda International (CRDA) 7,796.00p -4.71%
Dechra Pharmaceuticals (DPH) 4,076.00p -4.47%
Rightmove (RMV) 637.60p -4.47%
Auto Trader Group (AUTO) 664.00p -4.45%
Scottish Mortgage Inv Trust (SMT) 1,056.50p -4.43%
Ocado Group (OCDO) 1,445.50p -4.43%
Ashtead Group (AHT) 5,158.00p -4.30%
Experian (EXPN) 3,086.00p -3.56%

FTSE 250 - Risers

Playtech (PTEC) 633.50p 8.29%
Renishaw (RSW) 4,900.00p 6.71%
Capital & Counties Properties (CAPC) 171.40p 1.42%
Harbour Energy (HBR) 348.20p 1.39%
Centrica (CNA) 77.66p 1.30%
Cranswick (CWK) 3,756.00p 1.24%
TBC Bank Group (TBCG) 1,484.00p 1.23%
Crest Nicholson Holdings (CRST) 334.80p 1.21%
Britvic (BVIC) 940.00p 1.08%
Premier Foods (PFD) 115.60p 1.04%

FTSE 250 - Fallers

Hipgnosis Songs Fund Limited C Shs NPV (SONC) 112.50p -100.00%
Future (FUTR) 3,076.00p -9.74%
Auction Technology Group (ATG) 1,000.00p -9.62%
Trustpilot Group (TRST) 164.90p -7.72%
Oxford Biomedica (OXB) 809.00p -6.80%
JTC (JTC) 750.00p -5.96%
Syncona Limited NPV (SYNC) 182.80p -5.58%
Bytes Technology Group (BYIT) 466.80p -5.16%
Chrysalis Investments Limited NPV (CHRY) 186.50p -5.09%
Genus (GNS) 3,642.00p -4.96%